Program:

Registration: at ICIAM 2007 Congress Office located that day in the main building of the University of Zurich, room KOL-F-103, Rämistrasse 71.

Dr. Simone Farinelli, Credit & Country Risk Control, UBS, Zurich, Switzerland
simone.farinelli@ubs.com
  
Title: Generation of Consistent Market and Credit Scenarios: The Calibration of a Geometric Model

Abstract: A scenario generator for both market and credit risk drivers is developed. On the basis of historical data, financial time series are projected into the future. The foundations were given in 1998 by Andrew Smith, who developed a coherent mathematical framework applicable to all stochastic investment models, allowing for features commonly believed to be essential and/or desirable: positive interest rates, mean reversion (where appropriate), full term structures, efficient markets, absence of arbitrage.
The model consists in two parts:

• a geometrical part, where the concepts of gauge, deflator and term structure for every
  quantity modelled is introduced, and
• a stochastic part, where a stochastic model is applied to a minimal set of gauges (called
  principal gauges) to generate the scenario simulations.
  The stochastic part is calibrated for the special choice of a VARMA model.

Title: Tests of Covariance Matrices

Abstract: How can be decided, which kind of estimator of covariance matrices is more suitable to reflect the expected portfolio risk. A kind of Maximum-Likelihood-test is introduced for solving this problem. Some concrete test results concerning different bond portfolios are shown. For these bond portfolios the simple historic covariance matrix and covariance matrices of two-factor- and three-factor-models have been tested.

Prof. Dr. Hans-Jürgen Wolter, CRO and Chief Actuary, Swiss Life, Switzerland
HansJuergen.Wolter@swisslife.ch

Title: Risk-based Capital Models in Life Insurance

Abstract: A number of recent initiatives such as the preparation for Solvency II for instance have led to an increase in the extent to which insurance companies manage their risk and capital. Until now, economic capital models have been developed by the best part of the global insurance industry; it is no longer the domain of the sophisticated insurance undertakings. And yet the design of economic capital models is still under way. The aim of this talk is to discuss the characteristics of proper capital models. Often, the requirements are controversial. A model that is impeccable from a conceptual point of view might be hard to implement. We conclude with some remarks on risk measurement, motivated by the fact that some European insurance regulators have begun to demand for multi-period risk measures.

Dr. Jörg Behrens, Partner, Head of Financial Risk Management Central Europe, Ernst & Young
joerg.behrens@ch.ey.com

Title: Strategic Risk Management: Ideas and Questions

Abstract: While risk management is highly sophisticated and forms an integral part of the financial services industry, most firms still struggle to benefit from their analytical know-how when it comes to strategic planning. We discuss problems and ideas to bridge the gap between the two worlds.

Dr. Oleg Zakharov, General Manager Europe, Lacima Group, U.K.
oleg@lacimagroup.com

Title: In Full Swing: Optimizing Portfolios of Flexible Gas Contracts

Abstract:  After presenting a brief history of gas markets and the origin of swing contracts we discuss realistic examples of swing contracts and Stochastic Dynamic Programming approaches in optimizing a single swing contract.
Further topics treated are the importance of hedging in forward markets and liquidity considerations and the value optimization conditional on limited risk.

Dr. Alexander Boogert, Essent Trading BV, The Netherlands
Alexander.Boogert@essent.nl

Title: Gas Portfolio and Transport Optimization

Abstract: The transport of natural gas has received significant attention in the last months with the large price spikes in the UK facing sudden cold weather and the flow stop from Russia to Ukraine. Transport is a necessity in a world where gas sources are far removed from the gas demand, and in which a gas portfolio easily spans several countries. Meanwhile, the range of options within a gas portfolio is growing with an increasing number of instruments and increasing international gas trading. This has led to a situation where decisions have become non-trivial. The objective of this article is to describe the construction of an integrated approach for gas portfolio and transport optimization

Prof. Dr. Yves Smeers, Universite Catholique de Louvain & Electrabel, Belgium.
smeers@core.ucl.ac.be

Title: Investment models in restructured electricity markets subject to risk

Abstract: Capacity expansion optimization models dominated the area of investment in generation during the former days of the regulated electricity sector. These models have lost some of their appeal today and other tools, some inspired by the theory of real options, have replaced them. We reconsider the old capacity expansion model that we expand into equilibrium models in a risky environment. For the sake of tractability and robustness we assume no market power. We first model risk by assuming firms with different cost of capital; this equilibrium model deviates minimally from the usual capacity expansion model (which assumes a single cost of capital). Alternatively we also consider that the risk attitude of firms is represented through risk functions; this forces one to consider a stochastic equilibrium model. We compare the approach to equilibrium (not optimization) models of the real option type.